Farrow-to-Wean Business Booms

A southern Iowa business is rapidly becoming a major supplier of quality weaned pigs to meet growing customer demands. The continuing exodus of sows from the United States' breeding herd has left a number of independent finishers desperate to find a source of pigs. For the past few years, Canadian interests, plus a steady influx of weaners and feeders into the eastern Cornbelt from North Carolina,

A southern Iowa business is rapidly becoming a major supplier of quality weaned pigs to meet growing customer demands.

The continuing exodus of sows from the United States' breeding herd has left a number of independent finishers desperate to find a source of pigs.

For the past few years, Canadian interests, plus a steady influx of weaners and feeders into the eastern Cornbelt from North Carolina, have captured a fair chunk of that business.

U.S. Company Enters Picture

With little fanfare, one company is working to fill the void of U.S. suppliers by producing large groups of high-health, weaned pigs to feed out across the hog belt.

Natural Pork Production (NPP) II of Harlan, IA, owns and operates five sow units boasting more than 20,000 sows in Iowa, about 10,000 in Indiana and a few thousand in Minnesota.

Somewhat unique in the hog industry, NPP II's sow units are only built (or acquired) when it is determined that there is an adequate customer base to secure a buyer for virtually all the pigs. Buyers sign seven-year contracts guaranteeing they will receive a set number of pigs at a flat price, according to managing partner Gary Weihs.

Contract Pricing

Prices are set competitively and based on the principle that there is a $10 profit per market hog (based on averages over time) in the farrow-to-finish model. Weihs figures there is about a 40-60 split in capital, with 40% belonging to the farrow-to-wean sector and the remaining 60% used for wean-to-finish production. “So if there is $10 profit in a finished pig, we will take $4, the customer can have $6 and we should all make money,” he explains.

Weihs continues: “We flat price everything so that we make a little bit per head and base our profits on quantity; (we) leave the lion's share of the profits for the finishers because they are our customers, and we want to ensure that they can make enough money to stay in business.”

Partner Mark Zaccone says demand is strong for the pigs, but not just anybody can sign a long-term contract with NPP II. Financial background checks are done on each potential buyer.

“If they don't have the wherewithal to withstand a seven-year contract, they need to have someone back them should there be trouble, thus reducing revenue risk,” he notes.

“The whole goal of this is to take as much risk out of this as we can, and it has been extremely successful. We still carry the health risk with the sow unit and that is enough,” adds Weihs.

Returning to Raise Pigs

After an absence of 24 years while working in a variety of executive business positions outside Iowa, Weihs, a civil engineer by education and operations manager by trade, returned to his native state in 1998 to start NPP.

“Our objective was to move back to Iowa because we had lived in 10 different states. Frankly, moving around is not all that it's cracked up to be,” says Weihs.

In 1998, he built the first of two, approximately 5,000-sow units in rural Harlan, IA, less than two miles from where he grew up on a 60-sow operation.

The second sow site was built in 2000. The family's home overlooks both sow sites, and the company's office is located over their garage.

Other Iowa sow sites were added two miles west of Brayton in 2002, and near Estherville and Burt in 2003.

In the past year or so, NPP II has purchased an existing Austin, MN, operation of around 2,400 sows, and purchased, renovated and converted a farrow-to-finish operation to about a 10,000-sow, farrow-to-wean operation at Crawfordsville, IN.

Weihs says NPP II's rapid growth in just six years has all been due simply to growing demand in the weaned pig business. “We saw a need from customers who wanted to buy large groups of healthy, weaned pigs and thought we could fill that need.”

A few years back, all producers wanted was a 14-day-old pig, he recalls. Now he says the industry has learned these pigs are not as profitable as older-weaned pigs. The biggest sellers now are 21-day-old, 15-lb. pigs.

In providing weaned pigs, Weihs and his partners are dedicated to helping restore the sow base to Iowa and providing agricultural jobs for its citizens. He points to the fact that last year Iowa imported 14.2 million pigs, including weaners and feeder pigs.

“The farrowing business peaked out in 1968 when there was a little over 2.5 million sows in Iowa,” Weihs recalls.

“Last year, Iowa fell below one million sows for the first time. More than 60% of that industry is gone, and that's a lot of jobs. For example, each 5,000-sow unit will employ 16 people.”

Management

The partners in NPP II include Gary and Diane Weihs, Mark and Kim Zaccone, Ron Beach and Mona Jones and Tom Zaccone. They partner with a local company, AMVC Swine Management Services in Audubon, IA, to oversee the design, planning and management of the pork operation.

In addition, they work with a related farming company that contracts application of plant nutrients to area fields.

In the organizational structure, the staff at NPP II and AMVC “take great pains to articulate the company's vision and strategy to everybody,” explains Gary Weihs. The key is to empower staff to perform at the highest level and stay customer-focused.

Goals are set and performance is rewarded with incentives and bonuses. A traveling trophy is awarded quarterly to the top-producing sow unit in the system, he explains.

Employees are empowered to achieve superior production by ensuring that all levels of the system have access to all pertinent performance data — and the process really works, attests Weihs.

For instance, most sow units are hitting the mark on targeted pigs weaned/ sow of about 9½ pigs or higher, and the pigs weaned/mated female/year target in the low to mid-20s.

The day-to-day management of the pork business, including personnel, is overseen by the Audubon-Manning Veterinary Clinic (AMVC), Audubon, IA. The clinic provides expertise in production and health management and is led by Daryl Olsen, DVM, and Steve Schmitz, DVM.

Herd Health Program

A key to the AMVC health program is bringing in gilts as weaned pigs from off-site, isolated gilt pool barns, says Weihs. Cull sows are run through the gilt development site to acclimate young gilts to any disease agents in the system, so they can achieve immunity by the time they enter the system to be bred naturally.

All sows are bred by artificial insemination using semen screened by polymerase chain reaction for PRRS (porcine reproductive and respiratory syndrome).

AMVC has used herd rollovers to take some NPP II sow herds negative for PRRS, says Weihs. If a sow unit breaks with PRRS, serum therapy is used. The farm strain of the virus is collected and cultured to create a “serum vaccine” that is injected into all animals on that site, including all developing gilts planned for introduction to that site. This procedure has worked well to gain control of the virus, and has enabled the unit to provide PRRS non-viremic pigs to the customer again 8-10 weeks after a break. (For more details on “serum vaccines,” read “Controversial PRRS Control Procedure Wins Advocates,” pages 20-22, June 15, 2004 issue of National Hog Farmer).

Less than half of NPP II's sow units remain positive for PRRS, says Weihs. The ultimate goal is to convert all units to PRRS-negative status.

Sow replacement rates average 45%. Culling is not based just on lameness or poor breedback performance as is the case in many herds, states Weihs. Once sow performance starts to dip after a few parities, sows are replaced.

Environment

Weihs professes a “do it right” mentality when it comes to state-of-the art manure management technology.

In the farrow-to-wean systems run by NPP II, manure from 8-to-12-ft.-deep sow gestation manure pits and 2- ft.-deep farrowing pits are injected into the soil, normally during the spring and fall. Contract manure applicators use umbilical cord and tank injection systems, along with flow meters and pressure gauges, to monitor application rates. Neighbors are notified of application times in advance by letter.

Indiana Acquisition

At the Crawfordsville, IN, operation, the previous owner had a record number of manure spills and fish kills, which resulted in the loss of the producer's permit and the eventual sale of the operation to NPP II.

The Iowa company has worked with the state government and local environmental groups in Indiana to rectify concerns. As the operation was converted from farrow to finish to farrow to wean, existing concrete pit walls were supported by second concrete walls built inside the structures. Pipelines and clean-out ports are being replaced and surrounding soils returned to proper environmental standards.

Being a progressive producer and solid community partner has brought its rewards for Weihs, his team and NPP II investors. A number of customers are also investors, based on the company's principle that customers should always have the option to own a piece of the farrowing business.

Return on investment has averaged in the targeted range of 20-30% for NPP II's business.

Investor, Customer Opportunities

Getting investors and customers to come into the hog business in the past few years has not been an easy task, what with all of the large pork production companies that have had financial hardships, says Gary Weihs, managing partner of Natural Pork Production (NPP) II, a farrow-to-wean operation based in the rolling hills of southwest Iowa at Harlan.

That's why Weihs has surrounded himself with partners who include a savvy group of engineers, financial planners and a 20-year veteran of the Farm Credit agency to help build a sound pork business.

Partner Mark Zaccone is slowly taking over the day-to-day operation of NPP II to free Weihs to develop other agricultural businesses within Weihs Enterprises. One such endeavor is to spark development of a renewed dairy industry in Iowa.